6 Steps to Finding the Best Financial Advisor

When trying to find the best financial advisor, many people often ask their attorney or accountant for a referral. It makes sense since their clients trust their advice. But just as important, these professionals cross-pollinate with the financial advisors of many of their clients, like Glassman Wealth Services, so they get to know a variety of financial planners, what type of expertise they have, and who may be a good fit for their client in need of a financial advisor.

How to Find the Best Financial Advisor

That’s why Asking People That You Trust is #1 on my list of 6 Steps to Finding the Best Financial Advisor.

While we believe that a referral from a trusted advisor is one of the best places to start, your vetting process shouldn’t end there. Keep in mind that this person will be managing your assets and advising you on key financial decisions that will affect your retirement and other financial goals.

It’s an important decision for you and your family, so here are 5 more important things you should consider when choosing a financial advisor:

2. Decide What type of financial advisor you want:

Are you looking for someone to just manage your investments, or do you want more comprehensive financial planning services? Some financial advisors, like Glassman Wealth Services, integrate tax, estate and retirement planning into their services, as well as investment management. To give you a better understanding of the difference and help you make the best choice, it might help to read our article Investment Advisor vs. Financial Planner: Which is the Best Choice for You.

3. Look at their website:

While a website is ultimately a marketing tool of each firm, and you would expect them to make a good effort to describe their services and expertise to attract potential clients, it’s also very useful to see how well they communicate with their clients. Are they using financial jargon that’s difficult to understand or do they explain financial concepts in plain English? Do they clearly explain their services and how they work with clients? Do they stand out in some way that differentiates them from the others?

4. Consult Top Financial Advisor lists:

While there is no perfect ranking list, Top Financial Advisor Lists can provide the names of some of the biggest and best financial advisors in the industry. We recently compiled the Best of Top Financial Advisor Lists where we reveal how these lists decide who rises to the top. We’ll leave it up to you as to which one has the best ranking criteria and is most useful.

5. Ask how they are compensated:

You need to know how any advisor you might engage makes their money to determine if their advice is based on your best interest or could result in a hefty commission for them. Keep in mind that some fees and commissions may not be evident to you, so it’s important to ask. Generally, there are 3 types of advisors:

  • Fee-only advisor: Fee-only financial advisors are fiduciaries and don’t earn commissions or other fees on the investments they recommend. Instead they charge an annual fee, typically a percentage of the assets that they manage for you, a flat fee for their services, or sometimes both.
  • Registered Representatives: These include stockbrokers, investment managers and others who can earn commissions on the investments or insurance products they recommend. They are not fiduciaries meaning they only need to recommend investments that are suitable for clients, whereas fiduciaries must do what is in the best interest of their clients.
  • Independent or dually registered advisors: These financial advisors can charge a fee for managing assets and can also make commissions on investment or insurance products that they recommend. Ask what commissions they receive and if they rebate marketing fees called 12b1 fees they receive from mutual fund companies back to their clients since some financial advisors don’t always do that.

6. Meet with them:

You can learn so much more about a financial advisor during a meeting. Are they asking questions to better understand what you want from an advisory relationship? Are they following a pre-determined agenda or presentation, or are they interested in knowing what’s important to you?

I recommend that you come prepared with questions. You might want to know how often they will communicate with you and how. How they develop their investment strategies or what expertise they have in tax or estate planning. The Securities and Exchange Commission (SEC) has a useful guide: Top Tips for Selecting a Financial Professional that gives more detailed suggestions.

Going back to what I said in #1, your choice of a financial advisor will have an effect on the quality of the financial decisions you will make. By following my suggestions and carefully vetting those advisors you’re considering, I’m confident that you will find the best financial advisor for your family.

I’d love to know if these suggestions were helpful in your decision-making process.

Barry Glassman, CFP®
PLEASE SEE IMPORTANT DISCLOSURE INFORMATION

1 Comment

  1. […] You might also be interested in: 6 Steps to Find the Best Financial Advisor […]